Stocks tumbled on Friday, with the Dow industrials ending at a 6-1/2-year low, on fears the government may be forced to nationalize some big banks.
Uncertainty about how Washington will rescue beleaguered banks persisted even as the White House issued its most direct statement yet on banks, saying it supported a privately held banking system.
The S&P 500 had plunged close to a 12-year low before the White House statement.
We have had a loss in confidence because the government keeps changing its playbook, and when that happens investors don't want to put any capital into the market, said James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis.
They had been down more than 35 percent before the White House comments.
The Dow Jones industrial average <.DJI> fell 100.28 points, or 1.34 percent, to close at 7,365.67. The Standard & Poor's 500 Index <.SPX> ended down 8.89 points, or 1.14 percent, at 770.05. The Nasdaq Composite Index <.IXIC> dipped 1.59 points, or 0.11 percent, to 1,441.23.
For the week, the Dow fell 6.2 percent; the S&P 500 slid 6.9 percent; and the Nasdaq tumbled 6.1 percent.
Investors view the stabilization of the banking sector as crucial for the economy to avert further deterioration, with both businesses and consumer lending still constrained.
Bank of America closed at $3.79, and was the most heavily traded stock on the New York Stock Exchange. Citigroup ended at $1.95, the first time since January 1991 it closed below $2.
White House spokesman Robert Gibbs told a news conference: This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring they are regulated sufficiently by this government.
The White House statement followed comments by Senate Banking Committee Chairman Christopher Dodd, who told Bloomberg news in an interview that a nationalization of some banks could be needed at least for a short time.
CNBC television reported the U.S. Treasury department will provide some details on the Obama administration's bank rescue plan next week, helping financial shares cut losses.
Besides financials, top drags also included energy companies, with Chevron
Shares of BlackBerry maker Research In Motion
After the Dow broke through November's bear market lows on Thursday, investors worried that the S&P 500 <.SPX> might not be far from violating its three-month lows. There was also concern the market could retest levels not seen since 1997.
The expiration of February options may have exaggerated the intraday swings in the market on Friday as traders unwound their February positions and rolled them into March and longer-dated months.
Trading was active on the New York Stock Exchange, with about 2.12 billion shares changing hands, above last year's estimated daily average of 1.49 billion, while on Nasdaq, about 2.57 billion shares traded, above last year's daily average of 2.28 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of more than 8 to 3, while on Nasdaq about five stocks dropped for every two that rose.
(Additional reporting by Jennifer Ablan; Editing by Leslie Adler)